Towards and Economic Strategy for SA August 2019

The Minister of Finance, Mr Tito Mboweni, is calling on members of the public to make
comments on a paper published today, titled: Economic transformation, inclusive growth, and
competitiveness: Towards an Economic Strategy for South Africa.
The paper, prepared by the National Treasury, is an attempt to translate the broad outcomes
of inclusive growth, economic transformation, and competitiveness into specific programmes
and draw on a range of domestic and international literature to support these policy priorities.
This paper considers the contribution of specific growth reforms that can achieve the outcomes
of economic transformation, inclusive growth, and competitiveness.
This paper is a detailed examination of the structural reforms that can reverse the downward
trend in South Africa’s growth potential and competitiveness.
Weak growth over the last six years is a function of both cyclical and structural factors,
although structural factors have dominated, including sharply declining competitiveness,
which saw South Africa’s position in the Global Competitiveness rankings fall from 44th to 67th
between 2007 and 2018. A series of cyclical once-off shocks such as political turmoil, drought
and most recently load shedding by Eskom have further exacerbated the depth of the
slowdown. Together, these have served to compound and prolong the effect of weaker
confidence, leaving us with an economy that has almost 30% unemployment.
The paper draws on the National Development Plan to outline six themes and the contribution
of growth reforms within each theme that prioritize economic transformation, inclusive growth,
and competitiveness. The themes include:
 Modernizing network industries to promote competitiveness and inclusive growth
 Lowering barriers to entry and addressing distorted patterns of ownership through
increased competition and small business growth
 Prioritizing labour-intensive growth: agriculture and services
 Implementing focused and flexible industrial and trade policy to promote
competitiveness and facilitate long-run growth
 Promoting export competitiveness and harnessing regional growth opportunities
 Quantifying the impact of proposed growth reforms

The combination of low growth and rising unemployment means that South Africa’s
economic trajectory is unsustainable. Government should implement a series of growth reforms that promote economic transformation, support labour-intensive growth, and create a globally competitive economy. We start by highlighting five fundamental building blocks of sustainable long-run growth and then identify a series of specific and detailed reforms to raise potential growth. These growth reforms are organized according to the following themes:

(i) modernizing network industries;

(ii) lowering barriers to entry and addressing distorted patterns of ownership
through increased competition and small business growth;

(iii) prioritizing labour-intensive growth in sectors such as agriculture and services, including tourism;

(iv) implementing focused and flexible industrial and trade policy; and

(v) promoting export competitiveness and harnessing regional growth opportunities. We estimate the economy-wide impact of the proposed interventions over time based on when they can realistically be implemented, and find they can raise potential growth by 2–3 percentage points and create over one million job opportunities.